Ford Motors just detailed a strategic update to refocus the company. Ford reaffirms 2017 full-year financial guidance and 2018 outlook will be provided in January.

Ford will improve its operational fitness, refocus capital allocation and accelerate the introduction of smart vehicles and services.

  • Accelerating the introduction of connected, smart vehicles and services customers want and value. By 2019, 100 percent of Ford's new U.S. vehicles will be built with connectivity.
  • Equally aggressive plans for China and other foreign markets. 90% of Ford's new global vehicles will feature connectivity by 2020.

COST CUTTING:

Ford is cutting their costs, reducing automotive costs by 50 percent through 2022.

Ford is targeting $10 billion in material cost reductions. The team also is cutting engineering costs by $4 billion from planned levels over the next five years. They're increasing use of common parts across the full line of vehicles, reducing order complexity and building fewer prototypes. The reallocation begins with $7 billion of capital reallocation from cars to SUVs and trucks, including the Ranger and EcoSport in North America and the all-new Bronco globally.

Ford also has plans to build the next-generation Focus for North America in China, saving capital investment and ongoing costs. For is also reducing the internal combustion engine CapEx by a third and redeploying that capital into EV's.This comes in addition to the previously announced $4.5 billion investment.

The company is expanding its scope to include vehicles and services. All vehicles and services will be designed around human-centered experiences.

PARTNERSHIPS:

Ford states they will continue to leverage partnerships, remain active in M&A and collaborate to accelerate R&D. They've recently announced they are exploring a strategic alliance with Mahindra Group as it transforms its business in India, and Zoyte with the intention of developing a new line of low-cost all-electric passenger vehicles in China. 

When it comes to autonomous vehicle development, the company recently announced a relationship with Lyft to work toward commercialization and a collaboration with Domino's Pizza to research the customer experience of delivery services. Expanding electric vehicle revenue opportunities. 

GUIDANCE:

  • Ford is reaffirming its 2017 full-year financial guidance and said its 2018 outlook will be provided in January.
  • Ford reiterates its long-term goal of an 8 percent automotive operating margin. 
  • Ford says it will embrace the profound technological changes and new competition buffeting the industry.
  • Company will tap its strengths integrating hardware and software in complex devices, its proven ability to deliver scale and the trust tied to the Ford brand

TECHS:

Ford has recently snapped out of a downtrend dating from summer 2014. The stock had declined ~42% during that time before putting in a floor just below the breakdown level at 11. The rally seems to be not Ford specific as autos in general have rallied as a group during that time. 

With the group outperformance, strategic shift, and a new CEO in May, look for ford to sustain as a "catch up trade" if it holds these levels and the multiyear downtrend breakout. 

TRADE:

Dec15 2017 13C

Jan18 2019 12C and 15C